How are marketing fees for Big Apple Bagels franchisees calculated?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchise agreements require the franchisee to pay continuing marketing fees on a weekly basis, based on a percentage of franchisee sales. Marketing fees are not paid on franchise wholesale sales. The balance sheet includes marketing fund cash, which is the restricted cash, accounts receivable and unexpended marketing fund contributions. Although the marketing fees are not separate performance obligations distinct from the underlying franchise right, the Company acts as the principal as it is primarily responsible for the fulfillment and control of the marketing services. As a result, the Company records marketing fees in revenues and related marketing fund expenditures in expenses in the Condensed Consolidated Statement of Income. The Company historically presented the net activities of the marketing fund within the balance sheet in the Condensed Consolidated Balance Sheet. While this reclassification impacts the gross amount of reported revenue
Source: Item 23 — RECEIPTS (FDD pages 87–319)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, franchisees are required to pay continuing marketing fees on a weekly basis. These fees are calculated as a percentage of the franchisee's sales. However, marketing fees are not applied to franchise wholesale sales, meaning that if a franchisee sells products at wholesale prices, those sales are exempt from the marketing fee calculation.
The marketing fees collected are used to fund the Big Apple Bagels marketing efforts. The balance sheet includes marketing fund cash, accounts receivable, and unexpended marketing fund contributions, which are considered restricted cash. This indicates that these funds are specifically earmarked for marketing purposes and cannot be used for other operational expenses of the company.
Big Apple Bagels acts as the principal in managing these marketing services, taking primary responsibility for their fulfillment and control. Consequently, the company records the marketing fees as revenues and the related marketing fund expenditures as expenses in its Condensed Consolidated Statement of Income. This accounting treatment reflects the company's role in overseeing and executing the marketing activities funded by the franchisees' contributions.